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What Is an Annuity Loan?

Stan Haithcock
July 23, 2023
What Is an Annuity Loan?

Hi there, Stan, The Annuity Man, American's annuity agent, licensed in all 50 states. Scratch, scratch, itch, itch. My head is scratchy. I've got a full head of hair, by the way. Okay. Today's topic's kind of a weird one, and I might lose my mind over it. The topic is What is an Annuity Loan? L-O-A-N. I'm going to take a deep breath. I'm going to take a sip of Coca-Cola, the sugar-free kind, because I can't do the sugar, and then I'm going to tell you about my thoughts on annuity loans.

All right, here we go. I'm getting these calls occasionally about annuity loans. Can I get a loan off this annuity, Stan? Here's my opinion on that. Unless it's just an emergency, unless something had changed from when you purchased the annuity type to when you're asking me that question, should you get a loan on the annuity? Never, ever, ever, ever buy an annuity with the premise in mind in the future, you're going to take a loan off of it. Just don't do that. Not all carriers will. Truly, I've been doing this for decades. And I have thousands of clients and sell more annuities than anybody on the planet. I am Stan The Annuity Man, America's annuity agent. Not one client that I know of has taken a loan off of their annuity. Because to me, that's not suitable or appropriate.

That's a Loan

Now, in the world that I live in, which is the world of facts, truth, and simplicity, that's not normal in the annuity and life insurance sales world because every agent out there seems to make everything very complex. This sales pitch is so horrific it makes me want to vomit. They'll say, "Well, with this life insurance policy, you can get tax-free income. Be like the Rockefellers and get tax-free income off a life insurance policy." There's no tax-free income. It's called a loan. When you take a loan off a life insurance policy, there are fees for the loan. People say, "Well, this guy said, and this internet page said, and this website page said I could take, it's tax-free income." It's a loan. When you put money in the bank and you take money out of the bank, is that tax-free income? No, it's not. You're just taking your own money. When you get a loan from the bank, is that tax-free income? Nah, you're getting a loan.

The bottom line, whether it's life insurance or annuities, loans should not be attached to any of that. Period. Now, I know there are extenuating circumstances, emergencies, and all that stuff, and you see the ads on TV where people give you pennies on the dollar for your annuity or life insurance policy, whatever. Those are secondary market type things. But this question we had to talk about is annuity loans. I'm not even going to go into the specifics of how that might even work because if you're my client, I'm going to say, "What are you doing? What are you talking about? Why would you ever do that? You got to give me a really, really, really, really good reason." And if anyone's trying to sell you a life insurance product, then say tax-free income, no, no, no. That's a loan. That's a loan off of the policy. Period. End of story. You can't polish it up more than that.


I know that the Internet's rife with all these sales pitches. Give me a break. That sales pitch has been around for over 30 years. They just keep putting lipstick on the pig, as they say. When you buy an annuity, especially through us at The Annuity Man, you can go to our site, run your quotes on our proprietary calculators, get books for free, watch the videos and the podcasts and all that stuff. We're going to make sure you're putting money in whatever annuity type is appropriate and suitable and is not overfunded.

Don't Misuse the Product

The annuity industry suggests that you should not put more than 50% of your investible assets. I'm not talking about houses, cars, or guitars. I'm talking about IRAs, non-IRAs, 401(k)s, savings accounts, and all that stuff in annuities. So, 50%. Can we push it a little bit more and look for a few more percentage points? If you tell me the reason why and I go to the carrier and say yes. Yeah, I can push that. But if you just put in your mind 50% in annuities of all types, Single Premium Immediate Annuities, Deferred Income Annuities, Qualified Longevity Annuity Contracts, Index Annuities, Variable Annuities, whatever, the annuity type is, 50% total. You're not going to want to take loans off of that policy. Period. And some policies might allow you to take a loan off it, and some might not. I'm not even going to go down that rabbit hole because what I want you to take away from this is, please do not earmark annuities of any type for a loan. Please. That's misusing the product. It wasn't set up for that. All types were not set up for that.

You are fitting a square peg into a round hole. If there ever was an example, it's that. It's this annuity loan combination of words that should never exist. But as The Annuity Man, Stan, The Annuity Man, America's annuity agent, I have to talk about it because people are looking for that answer.

All that tells me is that annuities might have been inappropriately sold, and you might have put too much money in that annuity. And how did that agent get away with it? I don't know, but maybe they doctored the net worth a little bit to make it go through the suitability. I'm not going to accuse anybody, but the annuity industry is trying to make sure that that kind of nefarious sales practices out there of taking the little old lady in the trailer in Palatka, Florida, and putting all of her money in an annuity. They do not want that to happen. They do not want you to come to this and say, "I need to take a loan off that policy." Which means you put too much money into that policy. And that's really what it comes down to. The suitability, appropriateness, and proportion of the money that has been put into the annuity. If that has been done correctly, there is no conversation about loans.

Now, with that all being said and the fact that my head's about to pop off because annuity and loan are used in the same sentence, schedule a call if you want to discuss it with us. We will help as best as possible and try to find the solution that fits you, but an annuity should be the last place on earth you should be looking to take a loan from.

Never forget to live in reality, not the dream, with annuities and contractual guarantees! You can use our calculators, get all six of my books for free, and most importantly book a call with me so we can discuss what works best for your specific situation.

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